Pricing methods in outcome-based contracting: δ5: risk of efficacy failure-based pricing

Nimer S. Alkhatib, Ali McBride, Sandipan Bhattacharjee, Kenneth Ramos, Brian Erstad, Marion Slack, Dean Billheimer, Ivo Abraham

Research output: Contribution to journalArticle

4 Scopus citations

Abstract

Aims: Six Delta is a six-dimensional independent platform for outcome-based pricing/contracting. The fifth dimension (δ5) estimates prices on the basis of the risk of efficacy failure of a drug. We describe this dimension’s methodology and present a proof-of-concept application to the treatment of non-small cell lung cancer (NSCLC) with EGFR mutation with osimertinib. Materials and methods: The risk of efficacy failure pricing dimension utilizes a seven-step method: (1) defining risk; (2) extracting data; (3) predicting models; (4) performing Monte Carlo Simulation (MCS) to estimate risk of efficacy failure; 5) estimating ranges for a payback; (6) adjusting for medical inflation; and (7) performing Monte Carlo Simulation (MCS) to estimate the DSPRisk of efficacy failure. A proof-of-concept exercise with osimertinib in NSCLC was performed for two hypothetical outcome-based contracts: 1-year (2019–2020) and 2-year (2019–2021). We estimated the risk of efficacy failure for osimertinib in terms of overall and progression-free survival versus standard of care. We used the estimated risk to estimate the price reduction on the wholesale acquisition cost (WAC) for the two hypothetical contracts: a 1-year (2019–2020) and 2-year contract (2019–2021). From this we estimated the DSPRisk of efficacy failure. Results: Based on the risk of OS and PFS efficacy failure for osimertinib in OS and PFS, in the 1-year contract, the DSPRisk of efficacy failure was estimated at $12,652 (or −13.44% the 2018 WAC) for a 30-day prescription. For the 2-year contract (2019–2021), the DSPRisk of efficacy failure was estimated at $13,019 (or −10.93% the 2018 WAC). Conclusions: We demonstrated that pricing methods based on risk of efficacy failure methods can be integrated into our proposed Six Delta platform for outcome-based pricing/contracting.

Original languageEnglish (US)
Pages (from-to)1246-1255
Number of pages10
JournalJournal of Medical Economics
Volume23
Issue number11
DOIs
StatePublished - Nov 1 2020

Keywords

  • Risk of failure
  • lung cancer
  • osimertinib
  • outcome-based-contracting
  • pricing methods

ASJC Scopus subject areas

  • Health Policy

Fingerprint Dive into the research topics of 'Pricing methods in outcome-based contracting: δ5: risk of efficacy failure-based pricing'. Together they form a unique fingerprint.

Cite this